Is YP’s Search Data Strong Enough to Win More Local Digital Ad Dollars?

Moves into mobile and display advertising

A few years ago, Foursquare, Yelp and Groupon seemed to be booming with brands and consumers, painting a pretty lucrative picture of the future of local advertising. Fast-forward to today—Yelp is reportedly up for sale, Foursquare's growth has stalled, and the daily-deal market has burned out.

Just as the future of local digital advertising looks like an uphill struggle again, YP is transitioning from its roots in print phone books to mobile and display advertising with what it claims is a lot of data to please both small businesses and big brands. At the same time, YP is up against giants like Facebook, Amazon and Google that now also have their sights set on local advertising.

"We see this tension [in small businesses], as well in the national players, between search and display," said Darren Clark, YP's chief technology officer. "More and more, we think they converge and complement each other. We have really good visibility into when customers are looking for stuff. Our ability to retarget off of that gives us a leg up in terms of attribution and all the things that can be in a big media plan."

Today, YP is launching a new mobile and online ad product for small businesses called ypDisplay, which lets marketers zero in on potential customers who have shown an interest in a product. The tool enables small- to medium-sized marketers to run geo-fenced mobile campaigns around places like car dealerships and malls. Brands will be able to pinpoint folks who searched for similar products to serve display ads to later.

Marketers can buy promos for YP's properties as well as for ad networks like AppNexus and Verve to reach wider audiences. Clark explained that ypDisplay is reliant on small businesses that have already invested in content (like websites and listings) and search advertising, two additional services YP provides.

"The last piece [for small businesses] is display—where it's about audience," he said. "Not only does it drive brand awareness for these local businesses, but it also enhances the performance of their search campaign."

Sophisticated buying tactics like geo-conquesting and search retargeting are nothing new for big brands, but it's a relatively advanced tactic for mom-and-pop shops that don't have sizable budgets or extensive digital know-how, Clark said.

Digital Is the New Phone Book
The new ad offering is YP's latest step in moving away from print. Just three weeks ago, the Atlanta-based company announced plans to spin off its print business into a separate company called Print Media LLC.

The split signals YP may soon kill off print, altogether. But that may not be a bad thing, said Matt Naeger, evp of digital strategy at Merkle. Unlike other digital players vying for a piece of the local-search market, YP could benefit from its sales teams that traditionally work closely with businesses to run campaigns.

"The local pizza shop doesn't run its own search campaign," Naeger said. "Google is trying to address that problem, too, with sales forces that go out to those businesses. But that's where the YPs of the world have an added advantage because they've been doing it for decades."

YP separates its digital ad products between small businesses and big brands. Just like the small-business arm, YP also runs geo-targeted ads for big brands. In 2013, it opened a national-sales office in New York to build closer relationships with advertisers and brands.

The local-search player's revenue backs up its digital push. Mobile makes up half, or $500 million, of YP's digital revenue. And a 2014 report from IDC ranked YP No. 5 in mobile search, after Google, Microsoft, Twitter and Yahoo.

YP claims 7.2 percent of the mobile-search market, a number that, at first glance, seems tiny but is actually a sizable share. Google controls 46 percent of mobile-search money, followed by Microsoft with 11.3 percent. Twitter and Yahoo own 17.8 percent of the market. All other search players combined make up the remaining 17.7 percent.

Those numbers mean Google is a double-edged sword for YP. Since the company only controls a sliver of the search market, it leans heavily on Google and Bing to drive traffic to its sites.

According to comScore, YP had 57 million mobile and desktop visitors in June 2014. In May 2015, that number dropped to 48 million.

"They are either buying their traffic or optimizing their traffic," Naeger said. "They don't have the device penetration that Google, Bing or Apple have at this point."

Abid Chaudhry, an analyst at BIA/Kelsey, agreed that YP's search traffic largely relies on Google and Bing but also pointed to its partnership with Yelp as an example of how more consumers are searching for local restaurants and shops through apps instead of search engines.

"It's not exactly the greatest amount of traffic in terms of volume, but it's very specialized [traffic]," Chaudhry said. "They're still pretty reliant on the big players in order to maintain that flow that they need to make retargeting, display and even the mobile-ad network feasible. But I think that's going to change over time."

At the same time, YP also faces massive competition in mobile, particularly with location-based ads. Other companies like NinthDecimal, xAd and Placed already specialize in niche targeting. Each company has its own twist that hones in on specific markets, but marketers complain about the quality of data and small scale of the campaigns.

YP's search data is rich for targeting, though, said Jennifer Wise, an analyst at Forrester Research.

"They're planning to tie their search data from across devices to inform the location targeting," Wise said. "They're able to layer on the intent that was signaled by a search to then target the right user when they're in the right location."

Meanwhile, Facebook and Google are also clamoring to win over local advertisers with promos that drive sales. "The question is, 'Is the data that YP has from search and from the inferred intent better than what Google or Facebook has?'" Wise said.

If the answer is yes, Wise said, she imagines that big marketers like consumer packaged-goods brands will want the same type of granular targeting.

"A big brand may now be interested in YP if someone is searching for CPG products," she explained. "If I'm Pampers, I can now begin to use that data to target [moms] when they're by Target."

BIA/Kelsey's Chaudhry said he could see YP working directly with big brands, eventually, similar to how it works with small businesses that don't hire agencies. It's part of a bigger trend where tech and media brands like Vox and AOL have set up branded content studios to build campaigns for marketers.

"I do think that there is going to be a tipping point where YP decides that they don't necessarily need to have the agency middleman in order to work with these large brands or these multilocation businesses," Chaudhry said. "I wouldn't say it's a significant part yet, but they're getting there."